Petrillo: A failed experiment

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Editor’s note: Joseph Petrillo has been a longtime columnist for Government Computer News. As part of the realignment of the 1105 Government Information Group publications, Petrillo’s columns will appear regularly in Federal Computer Week.

The problems with interagency contracts are well-documented. A lengthy series of reports by inspectors general and the Government Accountability Office tell a consistent story of little or no competition for orders, vague and elastic statements of work for services, orders outside the scope of the contract, improper use of revolving funds to “park” annual appropriations — I could go on.

Those defects don’t just persist, they grow. Interagency contracts now eat up 40 percent of all contract spending, and that percentage is likely to increase. No one is sure exactly how many interagency contracts there are, though they number in the hundreds.

Such contracts offer speed and convenience, and that’s why they’re so popular. But they sacrifice transparency, accountability and value. They save pennies in transaction costs but lose dollars in the price of goods and services acquired.

Congress has tried to fix some of the problems. For example, it required the Defense Department to implement Section 803 rules that enhance competition for task orders. And a bill passed last year requires public disclosure of all awards, including task orders, by Jan. 1, 2008. But that’s not enough.

Here are two ideas for solving the problems. The Acquisition Advisory Panel recommends better data collection, more rigorous procedures on orders valued at more than $5 million and a beefed-up management role by the Office of Management and Budget.

The other recommendation, by Professors Steven Schooner and Christopher Yukins of the George Washington University Law School, would go further. They suggest more robust processes, including a right to protest any task order. They also want DOD’s Section 803 reforms extended to all federal agencies, with full public disclosure before orders are placed.

After more than a decade, it’s time to pronounce interagency contracting a failure. The idea was that agencies would compete with one another and Darwinian selection would weed out weak programs. But there’s scant evidence that losers become extinct. And as the good professors point out, competition among agencies has been a race to the bottom. The winners are those who buy quick and dirty, if not cheap.

Letting a thousand contracting flowers bloom makes sense when you have excess employees. But the opposite is true. Schooner and Yukins’ research shows that DOD’s contracting dollars have mushroomed since 1990 while the number of contracting employees has shrunk. That trend is alarming because efficiencies alone can’t account for the huge volumes of transactions processed. At such quantities, acquisition quality must suffer.

Let’s start from scratch and retire all interagency contracts in fiscal 2009 unless agencies can prove that their benefits outweigh the added cost, complexity and risk. Acquisition employees are desperately needed elsewhere, so no one would have to lose his or her job. And having fewer contracts available would force vendors to stay competitive.